There is a significant transition that happens in the lives of many young people: moving from high school to college.
It's an exciting time, but it can also be a time of financial uncertainty, particularly for those who are unprepared for the responsibilities that come with managing money.
The good news is that state legislators, colleges, and universities are working to promote financial literacy among young people, and new programs and initiatives are being introduced to help students learn how to manage their finances responsibly.
The bad news is financial literacy is still a major lagging point for students, and it’s becoming more and more of a pressing issue.
The Generational Divide in Financial Literacy
According to a report by the Teachers Insurance and Annuity Association of America (TIAA) Institute, today's college students have less knowledge about financial matters than previous generations.1
The report used the TIAA Institute Personal Finance Index (P-Fin Index) to measure financial literacy and personal finance knowledge across eight areas, including earning, consuming, saving, investing, borrowing/managing debt, insuring, comprehending risk, and identifying go-to information sources.
The study found that while Generation Z and Generation Y answered 42% and 46% of questions correctly, respectively, older groups scored more than 10 points higher in most categories.1
Generation X was 52% correct, baby boomers 54%, and the silent generation 54%.1
Financial literacy disparities also exist by race and ethnicity, with white respondents answering an average of 55% of the P-Fin Index questions correctly, followed by Asian Americans (54%), Hispanics (38%), and Black Americans (37%).1
This is an issue that needs addressing immediately, as we need to ensure that financial literacy education is even across the board.
Financial Education Movement and Legislation
College students are also sounding their own alarm, as more than one in four say they are not prepared to be on their own financially. This concern is being fueled by the financial impacts of COVID-19 and rising inflation.
According to the “2022 College Student Financial Survey” conducted by WalletHub, a personal finance website, 86% of college students surveyed said the pandemic has made them more concerned about their financial future despite pushing them to try and be more financially responsible.2
Keep Reading: The 25 Most Common Financial Questions College Students Are Asking
Although 79% of students reported that their financial literacy has improved since the pandemic began, this isn’t saying much when the starting rate was so low. More still needs to be done.
To help address the issue, many states have turned to legislation for help in educating students about financial literacy.
In 2022 alone, 32 state governing bodies introduced fiscal education-related actions, according to the National Conference of State Legislatures. Some states have instituted requirements for half-credit financial literacy courses.3
For example, in Florida, students must take a half-credit course on financial literacy and money management beginning in the 2023-2024 school year to obtain a high school diploma.
Similar legislation has also been mandated in Georgia and Michigan, set to take effect in the 2024-2025 school year.3
The Future of Financial Literacy
The ongoing financial education movement demonstrates progress, but more needs to be done.
According to TIAA, only 28% of older adults have participated in a program to address financial illiteracy, and that figure has risen to 35% among Gen Z.1
However, that number is still too low, and more primary, secondary, and postsecondary financial training with a focus on diversity and inclusion is needed to ensure the needs of various socioeconomic groups are considered in content and delivery.
Another report by a non-profit organization found that about 22% of high school students have access to financial education now, an upward trend from 16% in 2018. Due to new programs and legislation, that percentage is expected to increase to around 40% in the future.4
The rise of financial literacy programs is a positive development that will help prepare young people for the financial responsibilities of adulthood.
By working together, and using effective programs, we can ensure that future generations are equipped with the knowledge and skills they need to manage their finances responsibly and achieve financial stability.
iGrad Programs Can Help
Fortunately, colleges and universities can take a proactive approach to help students become financially literate. Many institutions offer financial education programs that students can participate in to learn more about managing their finances.
iGrad is one of these programs – a financial literacy platform that offers interactive courses and tools to help students develop financial literacy skills. The platform covers a range of topics, including budgeting, credit scores, student loans, and identity theft.
In addition to providing students with the tools and resources they need to become financially literate, iGrad also offers personalized guidance and support.
Students can access one-on-one coaching and advice from certified financial planners who can help them navigate complex financial situations and make informed decisions.
By offering programs like iGrad, colleges, and universities can help students develop the financial literacy skills they need to succeed in college and beyond. With the rising cost of tuition and student debt, financial literacy is more important than ever before.
By investing in financial education programs, colleges and universities can help their students build a foundation for a financially stable future.
1 - https://www.tiaa.org/public/institute/publication/2022/2022-tiaa-institute-gflec-personal-finance-index
2 - https://wallethub.com/blog/college-banking-credit-cards/65596
3 - https://www.insightintodiversity.com/programs-on-the-rise-to-help-younger-generations-achieve-financial-literacy/
4 - https://www.ngpf.org/state-of-fin-ed-report-2021-2022/
